Wednesday, July 20, 2016

CoreLogic: Orange County Median Home Prices Hit New Record

by Bill McBride on 7/20/2016 12:47:00 PM

From Jeff Collins at the O.C. Register: $657,500: O.C. median home price hits record

The median price of an Orange County home – or the price at the midpoint of all sales – was $657,500, real estate data firm CoreLogic reported Tuesday. That’s up $29,000, or 4.6 percent, in a year and $6,000 in a month.
The previous peak of $645,000, reached in June 2007, is equivalent to $750,000 in today’s dollars – or $92,000 higher than June’s median.
This brings up a few important points that I've mentioned before ...

1. This is the median price - not a repeat sales index - and the median price can be impacted by the mix of homes sold (not as useful as a repeat sales index).

2. As Collins notes in the article, these are nominal prices. When adjusted for inflation (real prices), prices are still 14% below the bubble peak.

3.  This is not a bubble.  A bubble requires both excess appreciation and speculation, and there is a little evidence of speculation - these are qualified buyers who will not default if prices decline (unlike many buyers during the bubble).

4. Note that the central / coastal areas are closer to the previous peak than the outlying areas.  This is the typical pattern; the price increases start in the central / coastal areas, and then move inland as the cycle matures.  Plus the inland areas saw the most speculation during the bubble - especially using subprime loans - and it will take longer for prices to reach a new peak.